System and Method for Optimizing a Target Date Fund

ABSTRACT

A method, article of manufacture, and computer program product are presented for generating a glide path for a target date fund comprising a growth asset and a reserve asset, where the glide path is a distribution of the growth asset and reserve asset over a time period ending on an end date. The method includes identifying an acceptable risk level for the target date fund and determining, using the identified acceptable risk level, an inflection date. The method further includes calculating a value G(i) that is equal to a percentage of the target date fund comprising the growth asset at the inflection date and calculating a value R(i) that is equal to a percentage of the target date fund comprising the reserve asset at the inflection date. Finally, the method includes determining, using G(i) and R(i), the glide path for the target date fund, where at the end date the reserve asset comprises one hundred percent of the target date fund.

RELATED APPLICATIONS

This patent application claims priority to U.S. Provisional ApplicationNo. 61/380,636 filed on Sep. 7, 2010 which is incorporated by referenceherein.

FIELD OF THE INVENTION

The present invention relates generally to funds that adjust thedistribution of assets as a predetermined date approaches, and moreparticularly to methods, systems, and apparatus for determining how toreallocate assets over the investment lifetime.

BACKGROUND

The Pension Protection Act of 2006 established Qualified DefaultInvestment Alternatives (QDIAs) as safe harbors for investingnon-allocated defined-contribution assets. The Department of Labor'sguidelines for QDIAs advance three investment options: target datefunds, balanced funds, and managed accounts.

In the present context, “managed accounts” mean that a service providertailors diversified portfolios of the plan's investment options onbehalf of individual participants. Managed accounts hold the mostpromise for advisors, but they require adherence to an audited prudentinvestment process—a process that could take years to achieve scale.

General target date funds (TDFs) are a set-it-and-forget-it,one-size-fits-all approach; they begin aggressively, when the targetdate is distant, and then reduce risk through time. TDFs are the mostpopular choice of QDIAs now. However, TDFs have historically beenexecuted poorly because they have been designed to serve beneficiariesbeyond the target date—that is, to death. Such funds have become knownas “through” funds as contrasted to “to” funds, which are designed toend at the target date. A secondary issue with “to” funds is the amountof equities held at the target date. Individuals face a “risk zone” ininvesting for retirement, which comprises the five to ten years leadingup to and immediately following retirement, or other target event when,savings are at their highest level and the ability to recover from lossis at its lowest. TDFs typically comprise thirty to seventy percentequities during this time, putting the investor at substantial risk ifthere is a loss. Thus, what is needed is a method of managing a targetdate fund which ends at the target date in entirely safe assets, whilemaximizing return during the lifetime of the fund.

SUMMARY

A method is presented for generating a glide path for a target date fundcomprising a growth asset and a reserve asset, where the glide path is adistribution of the growth asset and reserve asset over a time periodending on an end date. The method includes identifying an acceptablerisk level for the target date fund and determining, using theidentified acceptable risk level, an inflection date. The method furtherincludes calculating a value G(i) that is equal to a percentage of thetarget date fund comprising the growth asset at the inflection date andcalculating a value R(i) that is equal to a percentage of the targetdate fund comprising the reserve asset at the inflection date. Finally,the method includes determining, using G(i) and R(i), the glide path forthe target date fund, where at the end date the reserve asset comprisesone hundred percent of the target date fund.

In another embodiment, an article of manufacture is presented comprisinga computer readable medium having computer readable program codedisposed therein to generate a glide path for a target date fundcomprising a growth asset and a reserve asset, wherein the glide pathincludes a distribution of the growth asset and the reserve asset over atime period ending on an end date. The computer readable program codecomprising a series of computer readable program steps to effectidentifying an acceptable risk level for the target date fund anddetermining, using the identified acceptable risk level, an inflectiondate. The computer readable program code further comprises a series ofcomputer readable program steps to effect calculating a value G(i) thatis equal to a percentage of the target date fund comprising the growthasset at the inflection date and calculating a value R(i) that is equalto a percentage of the target date fund comprising the reserve asset atthe inflection date. Finally, the computer readable program codeincludes a series of computer readable program steps to effectdetermining, using G(i) and R(i), the glide path for the target datefund, where at the end date the reserve asset comprises one hundredpercent of the target date fund.

In yet another embodiment a computer program product encoded in anon-transitory computer readable medium and useable with a programmablecomputer processor is presented, where the computer program product isfor generating a glide path for a target date fund comprising a growthasset and a reserve asset, where the glide path is a distribution of thegrowth asset and the reserve asset over a time period ending on the enddate. The computer program product includes computer readable programcode which causes the programmable processor to identify an acceptablerisk level for the target date fund and to determine, using theidentified acceptable risk level, an inflection date. The computerprogram product further includes computer readable program code whichcauses the programmable processor to calculate a value G(i) that isequal to a percentage of the target date fund comprising the growthasset at the inflection date, to calculate a value R(i) that is equal toa percentage of the target date fund comprising the reserve asset at theinflection date, and to determine, using G(i) and R(i), the glide pathfor the target date fund, wherein at the end date the reserve assetcomprises one hundred percent of the target date fund.

BRIEF DESCRIPTION OF THE DRAWINGS

Implementations of the invention will become more apparent from thedetailed description set forth below when taken in conjunction with thedrawings, in which like elements bear like reference numerals.

FIG. 1 is a block diagram of an exemplary system for optimizing theallocation of assets in a target date fund and relocating the assetsaccordingly over time;

FIGS. 2A and 2B are a flowchart depicting an exemplary method ofdetermining the distribution of assets according to Applicant's glidepath given an investor's acceptable risk level and redistributing theinvestor's portfolio accordingly;

FIG. 3A is a graph representing an exemplary glide path according toApplicant's invention wherein there is a thirty year investment periodand the inflection point is at year fifteen;

FIG. 3B is a graph of the exemplary glide path of FIG. 3A wherein thegrowth asset and the reserve asset each comprise a set of functions;

FIG. 4 is a graph representing an exemplary glide path according toApplicant's invention wherein there is a thirty year investment periodand the inflection point is at year twenty; and

FIG. 5 is a graph representing an exemplary glide path according toApplicant's invention wherein there is a thirty year investment periodand the inflection point is at year ten.

DETAILED DESCRIPTION

This invention is described in preferred embodiments in the followingdescription with reference to the Figures, in which like numbersrepresent the same or similar elements. Reference throughout thisspecification to “one embodiment,” “an embodiment,” or similar languagemeans that a particular feature, structure, or characteristic describedin connection with the embodiment is included in at least one embodimentof the present invention. Thus, appearances of the phrases “in oneembodiment,” “in an embodiment,” and similar language throughout thisspecification may, but do not necessarily, all refer to the sameembodiment.

The described features, structures, or characteristics of the inventionmay be combined in any suitable manner in one or more embodiments. Inthe following description, numerous specific details are recited toprovide a thorough understanding of embodiments of the invention. Oneskilled in the relevant art will recognize, however, that the inventionmay be practiced without one or more of the specific details, or withother methods, components, materials, and so forth. In other instances,well-known structures, materials, or operations are not shown ordescribed in detail to avoid obscuring aspects of the invention.

The schematic flow charts included are generally set forth as logicalflow chart diagrams. As such, the depicted order and labeled steps areindicative of one embodiment of the presented method. Other steps andmethods may be conceived that are equivalent in function, logic, oreffect to one or more steps, or portions thereof, of the illustratedmethod. Additionally, the format and symbols employed are provided toexplain the logical steps of the method and are understood not to limitthe scope of the method. Although various arrow types and line types maybe employed in the flow chart diagrams, they are understood not to limitthe scope of the corresponding method. Indeed, some arrows or otherconnectors may be used to indicate only the logical flow of the method.For instance, an arrow may indicate a waiting or monitoring period ofunspecified duration between enumerated steps of the depicted method.Additionally, the order in which a particular method occurs may or maynot strictly adhere to the order of the corresponding steps shown.

Applicant's invention generally concerns systems, methods, and apparatusto determine the distribution of target date funds utilizing Applicant'snovel glide path algorithm which redistributes the funds among aplurality of investment vehicles. Target date funds are funds thatadjust the distribution of assets as a predetermined date approaches,such as retirement or the sending of children to college. Theredistribution of assets over the investment lifetime is referred to asa “glide path” and becomes progressively more conservative as the targetdate approaches. This is done to build wealth during the early yearswhile insuring that the portfolio becomes more stable as the ability torecover from a loss decreases the closer the target date approaches.While the majority of target date funds are for retirement, most end atsome stage beyond retirement and thus maintain riskier assets at a timewhen the portfolio will be unable to recover if there is a loss.Applicant's novel investment model ensures that one-hundred percent(100%) of assets are protected at the target date while providing asufficient opportunity to build wealth over the investment lifetime.

If asset A is known to a have a particular risk and return whereas assetB is known to have a lower risk and a lower return, than an investor whoput's all of his money into asset A or all into asset B can expect therisk and return associated with that asset. The difficulty is indetermining the associated risk and return if the investor splits hismoney between the two assets. The risk and return of a mixed portfoliois not necessarily linear and in fact a mix of asset types can yield alower risk for a given return than the underlying assets. This followsfrom the fact that the financial performance of asset A and asset B arenot necessarily correlated. A portfolio representing a mix of assetsbased upon the efficient frontier can be combined with risk freeinvestments to create an optimal portfolio at any defined level of risk.

Turning now to FIG. 1, a system is presented for determining theallocation of assets in a target date fund and relocating the assets inaccordance with embodiments of the invention. In certain embodiments,apparatus 110 is connected to a network interface 108, where apparatus110 comprises computing device 120, visual display device 122, and adata input device, such as for example and without limitation, akeyboard 124, and/or a mouse 126. Computing device 120 comprisescontroller 126 comprising a programmable processor 128 interconnectedvia communication links with non-transitory computer readable medium130, computer readable program code 132 encoded in the non-transitorycomputer readable medium 130, and optional “WI-FI” module 234. Incertain embodiments, computing device 123, visual display device 122,and data input device are combined into a single hand-held device, suchas a tablet PC, laptop computer, cellular telephone, or PDA.

In certain embodiments, visual display device 122 comprises a liquidcrystal display (LCD) display, or a plasma display. In otherembodiments, visual display device 122 comprises a video projector andscreen.

In certain embodiments, non-transitory computer readable medium 130comprises non-volatile memory. In certain embodiments, non-transitorycomputer readable medium 130 comprises battery backed up RAM, a magnetichard disk assembly, an optical disk assembly, and/or electronic memory.By “electronic memory,” Applicant means a PROM, EPROM, EEPROM,SMARTMEDIA, FLASHMEDIA, and the like.

Optional WI-FI module 234 comprises a wireless network communicationmodule comprising a wireless network permitting communication with oneor more external computers or programmable devices in a network or withpoint-to-point communications. In certain embodiments, WI-FI module 234implements one or more of the embodiments of IEEE Specification 802.11(collectively the “IEEE Specification”). As those skilled in the artwill appreciate, the IEEE Specification comprises a family ofspecifications developed by the IEEE for wireless LAN technology.

The IEEE Specification specifies an over-the-air interface between awireless client, such as for example apparatus 110(d) (FIG. 1), and aserver or between two wireless clients. The IEEE accepted the IEEESpecification in 1997. There are several specifications in the 802.11family, including (i) specification 802.11 which applies to wirelessLANs and provides 1 or 2 Mbps transmission in the 2.4 GHz band usingeither frequency hopping spread spectrum (FHSS) or direct sequencespread spectrum (DSSS); (ii) specification 802.11a which comprises anextension to 802.11 that applies to wireless LANs and provides up to 54Mbps in the 5 GHz band using an orthogonal frequency divisionmultiplexing encoding scheme rather than FHSS or DSSS; (iii)specification 802.11b, sometimes referred to as 802.11 High Rate orWI-FI, which comprises an extension to 802.11 that applies to wirelessLANS and provides up to about 11 Mbps transmission in the 2.4 GHz band;and/or (iv) specification 802.11 g which applies to wireless LANs andprovides 20+Mbps in the 2.4 GHz band.

Processor 128 uses computer readable program code 132 to operatecontroller 126, WI-FI module 134, and visual display device 202.

In the illustrated embodiment of FIG. 1, processor 128 of apparatus 110is connected to a network interface 108. In certain aspects of theinvention, network interface 108 is connected to a network. In suchembodiments, data may be transmitted to and from processor 128 and thenetwork. In such embodiments, the data may be transmitted using optionalWi-Fi module 134.

In certain embodiments, the network that network interface 108 isconnected to is the internet. In other embodiments, network interface108 connects to a proprietary network, commercial network, ad hocnetwork, or other network. In certain embodiments, the network may be alocal area network (LAN), a wide area network (WAN), a personal areanetwork (PAN), or any other type of network. In certain embodiments, thenetwork is a financial network, such as the Electronic Funds Transfer(EFT) network, credit card network, debit network, ATM network, ACHnetwork, or other financial network.

In certain embodiments, network interface 108 connects to a server 112on a network. In such embodiments server 112 comprises a programmableprocessor 114 interconnected via a communication link with computerreadable medium 116, and computer readable program code 118 encoded incomputer readable medium 116. One of ordinary skill in the art willappreciate that while FIG. 1 depicts a single server, in certainembodiments, network interface 108 may connect to multiple serverswithout departing from the scope of the present invention.

In certain embodiments, computer readable medium 116 comprisesnon-volatile memory. In certain embodiments, computer readable medium116 comprises battery backed up RAM, a magnetic hard disk assembly, anoptical disk assembly, and/or electronic memory. By “electronic memory,”Applicant means a PROM, EPROM, EEPROM, SMARTMEDIA, FLASHMEDIA, and thelike.

In the illustrated embodiment of FIG. 1, server 112 further comprisesdatabase 102. In certain embodiments, database 102 may be a third-partydatabase.

Although many other internal components of apparatus 110 and server 112are not shown, those of ordinary skill in the art will appreciate thatsuch components and the interconnections are well known. Accordingly,additional details concerning the internal construction of apparatus 110and server 112 need not be disclosed in connection in the presentinvention.

The Applicant's system as illustrated in FIG. 1 is used to determine theallocation of assets in a target date fund according to Applicant'sinvestment model and to reallocate the assets accordingly. For purposesof illustration and clarity Applicant's investment model is describedherein as a two asset model comprising a growth asset and a reserveasset. The growth asset is a broadly diversified portfolio of U.S.stocks, foreign stocks, U.S. bonds, foreign bonds, real estate,commodities, and “opportunistic” investments. By “opportunistic”Applicant means any other investment that is performing well such as, byway of example and not limitation, natural resources, gold, orinfrastructure. The reserve asset is a mixture of treasury bills(Tbills) and treasury inflation protected securities (TIPS). In certainembodiments, the reserve asset also includes treasury notes and treasurybonds.

Applicant's investment model distributes the growth asset and thereserve asset according to either a growth model or a liability-drivenmodel depending on whether it is before or after an “inflection date”for that portfolio. The inflection date represents the time when thedistribution algorithm switches from the growth model to theliability-driven model. Thus, at the inflection date the distribution ofassets according to either model is the same.

Together the growth model and the liability-driven model are referred toas a glide path and balance the rate of return on investments with theassociated risk of loss. The growth model governs the distribution ofassets from the time of first investment until the inflection date andfocuses on generating high returns using the growth asset as, duringthis early period of investment, there is time for a portfolio torecover if necessary and asset balances are low. The liability-drivenmodel governs the distribution of assets from the inflection date untilthe target date and focuses on increasing the reserve asset to protectthe portfolio as the target date nears and the ability of the investorto recover from significant loss lessens. Thus, Applicant's glide pathgradually shifts the asset distribution from high return, high riskinvestments (the growth asset) to protective investments (the reserveasset) as the target date approaches, where the target date is the datewhen the reserve asset comprises one-hundred percent (100%) of aninvestor's portfolio.

FIGS. 2A and 2B illustrate a method of determining the distribution ofthe growth asset and reserve asset according to Applicant's glide pathand redistributing an investor's assets accordingly. Using the systemillustrated in FIG. 1, a target date, acceptable risk level, andinvestment portfolio of an investor is obtained, where the acceptablerisk level is a quantification of the investor's risk aversion, asillustrated by block 202. In certain embodiments, the quantification isin terms of a scale, by way of example and not limitation, from 1 to 10,wherein 10 refers to an investor who is highly risk adverse and 1 refersto an investor who is highly risk tolerant. In other embodiments, thequantification is in terms of high, medium, low risk aversion. In yetother embodiments, any form of quantification of an investor's riskaversion may be used to denote the acceptable risk level.

In certain embodiments, all or a portion of this information representedby block 202 is obtained from a proprietary or third-party database, ora series of databases. In certain embodiments, all or a portion of theinformation is obtained from a financial or investment institution. Insuch embodiments, the financial or investment institution may market ormanage the investor's investment portfolio. In certain embodiments, allor a portion of the information is provided by the investor.

In certain embodiments, the target date is the year the investor expectsto retire. In other embodiments, the target date precedes the expectedyear of retirement. In yet other embodiments, the target date is laterthan the expected year of retirement.

In certain embodiments, the acceptable risk level is provided by theinvestor. In other embodiments, the acceptable risk level is determinedbased on the current wealth of the investor and the investor's desiredasset return amount at the target date. By way of example and notlimitation, the acceptable risk level may be high for an investor whohas little current wealth and who desires to have high return on theirassets at the target date. By comparison, the acceptable risk level maybe moderate for an investor with significant wealth who desires to havehigh return on their assets at the target date. In other embodiments,the acceptable risk level is determined based on the years until thetarget date and desired asset return amount. By way of example and notlimitation, the acceptable risk level may be low where there is fortyyears until the target date and the investor desires a moderate returnon their assets. By comparison the risk level may be high where there isonly five years until the target date and the investor desires amoderate return on their assets. In other embodiments, the acceptablerisk level is determined based on any other relevant factors.

From the information obtained, the lifetime of the portfolio isdetermined, as indicated by block 204, where the portfolio lifetime isthe length of time which the investor's assets will be investedaccording to Applicant's model.

The optimal distribution of growth and reserve assets at the start dateof the glide path according to the growth model is then determined, asindicated by block 206. The growth model is the set of G(X)_(GM) andR(X)_(GM), wherein G(X)_(GM) is the optimal percentage of the growthasset that the investor's total portfolio should comprise for each yearX and R(X)_(GM) is the optimal percentage of the reserve asset for eachyear X.

In certain embodiments, G(X)_(GM) comprises a set having one or morefunctions representing the optimal distribution of U.S. bonds, foreignbonds, U.S. stocks, foreign stocks, opportunistic, commodities, and/orreal estate over time. In certain embodiments, R(X)_(GM) comprises a sethaving one or more functions representing the optimal distribution ofTbills and/or TIPS. In certain embodiments, R(X)_(GM) is zero.

As will be appreciated by one of ordinary skill in the art, while thepresent discussion focuses on yearly intervals, scope of Applicant'sinvention includes other time intervals, such as by way of example andnot limitation, quarterly, monthly, or even daily.

The inflection date is then set based on the acceptable risk level, asindicated by block 208, where the inflection date is in terms of thenumber of years until the target date. When the acceptable risk level ishigh, the inflection date will be closer to the target date. Conversely,where the acceptable risk level is low, the inflection date will befurther from the target date. The optimal value of growth and reserveassets at the inflection date is then determined using the growth model,as indicated by block 210.

As indicated by block 212, given the identified acceptable risk level,the liability-driven model is then optimized to move the portfolio toone-hundred percent (100%) reserves at the target date while stillgenerating the maximum returns on the growth asset balanced against theincreasing risk of unrecoverable loss as the target date nears. Asdiscussed above, at the inflection date the distribution of aninvestor's assets according to the growth model is equal to thedistribution of assets according to the liability-driven model. As alsostated, at the target date the investor's portfolio comprisesone-hundred percent (100%) reserve assets. In certain embodiments, theoptimal distribution of the growth asset over time according to theliability-driven model and given the investor's acceptable risk levelcan thus be calculated as a straight line where:

${{G(X)}_{LDM} = {\frac{G_{I}}{X_{I}}(X)}};$

wherein G(X)_(LDM) is the value of the growth asset according to theliability-driven model, G_(I) is the value of the growth asset at theinflection date, X_(I) is the inflection date, and X is the number ofyears until the target date. Accordingly, the optimal distribution ofthe reserve asset can be calculated as:

${{R(X)}_{LDM} = {{\left( \frac{R_{I} - 100}{X_{I}} \right)X} + 100}};$

wherein R(X)_(LDM) is the value of the reserve asset according to theliability-driven model, R_(I) is the value of the reserve asset at theinflection date, X_(I) is the inflection date, and X is the number ofyears until the target date. In this manner the liability-driven modelis identified given the acceptable risk level. The liability-drivenmodel is therefore the set comprising G(X)_(LDM) and R(X)_(LDM).

In certain embodiments, the optimal distribution of the reserve assetover time according to the liability-driven model and given theinvestor's acceptable risk level can be calculated as a curve where:

${{R(X)}_{LDM} = {\left\lbrack {1 - \left( \frac{X}{X_{I}} \right)} \right\rbrack \cdot \left\lbrack \frac{1}{\left( {1 + d} \right)^{X}} \right\rbrack}};$

wherein R(X)_(LDM) is the value of the reserve asset according to theliability-driven model, X_(I) is the inflection date, X is the number ofyears until the target date, and d is the expected annual return on thereserve asset. Accordingly, the optimal distribution of the growth assetcan be calculated as:

G(X)_(LDM)=1−R(X)_(LDM).

wherein G(X)_(LDM) is the value of the growth asset according to theliability-driven model, G_(I) is the value of the growth asset at theinflection date, X_(I) is the inflection date, and X is the number ofyears until the target date. In this manner the liability-driven modelis identified given the acceptable risk level. The liability-drivenmodel is therefore the set comprising G(X)_(LDM) and R(X)_(LDM).

As will be appreciated by one of ordinary skill in the art, the optimaldistribution of the growth asset and/or the reserve asset may further becalculated in terms of months, weeks, days, or any other increment oftime using the formulas provided above.

Once the liability-driven model is optimized, the distribution of thegrowth asset and the reserve asset for each interval of time until thetarget date can then be determined. Turning to FIG. 2B, as indicated byblocks 214 and 216, for each time interval over the lifetime of theportfolio, it is determined whether the interval is after the inflectiondate. If it is not, the optimal distribution is determined using thegrowth model, as indicated by block 218. If it is, the optimaldistribution is determined according to the liability-driven model, asindicated by block 220.

In certain embodiments, the optimal glide path according to Applicant'sinvention is then presented. In certain embodiments, presenting refersto displaying a chart or graph of the glide path on visual displaydevice 122. In other embodiments, presenting refers to printing theresult using a periphery device in communication with apparatus 110.Finally, for each interval over the lifetime of the portfolio, theportfolio is redistributed according to the glide path, as indicated byblocks 222 and 224.

In certain embodiments, individual blocks described above may becombined, eliminated, or reordered.

In certain embodiments, instructions, such as instructions 132 (FIG. 1),are encoded in computer readable medium, such as non-transitory computerreadable medium 130 (FIG. 1), wherein those instructions are executed bya processor, such as processor 128 (FIG. 1), to perform one or more ofthe blocks 202, 204, 206, 208, 210, 212, 214, 216, 218, 220, 222, and224 recited in FIGS. 2A and 2B.

In yet other embodiments, the invention includes instructions residingin any other computer program product, where those instructions areexecuted by a computer external to, or internal to, a computing systemto perform one or more of the blocks 202, 204, 206, 208, 210, 212, 214,216, 218, 220, 222, and 224 recited in FIGS. 2A and 2B. In either casethe instructions may be encoded in a computer readable mediumcomprising, for example, a magnetic information storage medium, anoptical information storage medium, an electronic information storagemedium, and the like. “Electronic storage media,” may mean, for exampleand without limitation, one or more devices, such as and withoutlimitation, a PROM, EPROM, EEPROM, Flash PROM, CompactFlash, SmartMedia,and the like.

FIG. 3A illustrates an exemplary glide path according to Applicant'sinvention wherein there is a thirty (30) year investment period and theinflection date is at year fifteen (15). As can be seen in theillustrated embodiment of FIG. 3A, portion 302 of the graph representsthe growth model while portion 304 represents the liability-drivenmodel. As can also be seen in the illustrated embodiment of FIG. 3A, thedistribution of assets is shown as the set of two functions representingthe distribution of equity and bonds. As can be seen in FIG. 3A, at thestarting date of the glide path the growth asset equals one-hundredpercent (100%) of the total investment portfolio and compriseseighty-five percent (85%) equity and fifteen percent (15%) bonds. FIG.3B illustrates the exemplary glide path of FIG. 3A wherein the growthasset is further shown as a set of functions representing real estate,commodities, opportunistic, U.S. stocks, foreign stocks, U.S. bonds, andforeign bonds and the reserve asset is shown as two functionsrepresenting TIPS and Tbills.

FIG. 4 further illustrates an exemplary glide path according toApplicant's invention wherein there is a thirty (30) year investmentperiod and the inflection date is at year twenty (20). As can be seen,portion 306 represents the growth model while portion 308 represents theliability-driven model. Finally, FIG. 5 illustrates an exemplary glidepath according to Applicant's invention wherein there is a thirty (30)year investment period and the inflection date is at year ten (10). Ascan be seen, portion 310 of FIG. 5 represents the growth model whileportion 312 represents the liability-driven model.

The description hereinabove should not be interpreted as meaning thatApplicant's glide path allocation algorithm comprises two linearinvestment scenarios. Table 1 shows the investment allocations in ascenario wherein the time to target is 45 years, and wherein theinflection date is set at 16 years.

TABLE 1 Time to R Equity Bonds Reserve 45 96.3 3.7 0 44 95.6 4.4 0 4394.8 5.2 0 42 94.1 5.9 0 41 93.4 6.6 0 40 92.7 7.3 0 39 91.9 8.1 0 3891.9 8.8 0 37 90.5 9.5 0 36 89.7 10.3 0 35 89 11 0 34 88.2 11.8 0 3387.5 12.5 0 32 86.8 13.2 0 31 86 14 0 30 85.3 14.7 0 29 84.5 15.5 0 2883.8 16.2 0 27 83.1 16.9 0 26 82.3 17.7 0 25 81.6 18.4 0 24 80.9 19.1 023 80.2 19.8 0 22 79.4 20.6 0 21 78.7 21.3 0 20 78 22 0 19 77.2 22.8 018 76.5 23.5 0 17 75.7 24.3 0 16 75 25 0 15 72.8 24.2 3 14 70.2 23.5 6.313 67.5 22.5 10 12 64.5 21.5 14 11 61.2 20.5 18.3 10 57.8 19.2 23 9 53.818 28.2 8 49.7 16.5 33.8 7 45 15 40 6 40 13.3 46.7 5 34.7 11.5 53.8 428.8 9.5 61.7 3 22.3 7.5 70.2 2 15.5 5.2 79.3 1 8 2.7 89.3

As Table 1 shows, the allocation of investments in bonds increases from45 years to target to 16 years to target. Thereafter, the investment inbonds decreases. This being the case, year 16 comprises the “inflectiondate” in this scenario.

Table 1 further demonstrates that the investment in bonds drops from 25percent in year 16 to 2.7 percent in year 1 to 0 in year 0. Table 1further demonstrates that the investment in equities drops from about 96percent in year 45 to about 76 in year 15, or about 1.33 percent peryear until the inflection date. After the inflection date, theinvestment in equities drops from 75 percent to 0 percent in 15 years,or about 5 percent per year. The inflection date can be identified byabout a 3-4 fold increase in the rate of decrease per year of the equityinvestment percent.

Table 1 further shows that the ratio of equities investment percent tobond investment percent drops from an initial ratio of about 26 to about3 at the inflection date. Thereafter, from year 15 to year 1 the ratioremains about constant at about 3. The inflection date can be identifiedwhen the ratio of equity percent to bond percent remains constant on ayearly basis.

While the preferred embodiments of the present invention have beenillustrated in detail, it should be apparent that modifications andadaptations to those embodiments may occur to one skilled in the artwithout departing from the scope of the present invention.

What is claimed is:
 1. A method of generating a glide path for a targetdate fund using a computing device comprising a processor and anon-transitory computer readable medium in communication with theprocessor, wherein the target date fund comprises a growth asset and areserve asset, wherein the glide path comprises a distribution of thegrowth asset and reserve asset over a time period ending on an end date,the method comprising: identifying, using the processor, an acceptablerisk level for the target date fund; determining, using the processorand the identified acceptable risk level, an inflection date;calculating, using the processor, a value G(i) that is equal to apercentage of the target date fund comprising the growth asset at theinflection date; calculating, using the processor, a value R(i) that isequal to a percentage of the target date fund comprising the reserveasset at the inflection date; and determining, using the processor andusing G(i) and R(i), the glide path for the target date fund, wherein atthe end date the reserve asset comprises one hundred percent of thetarget date fund.
 2. The method of claim 1, wherein said determining theglide path further comprises: calculating, using the processor, a valueG(n) that is equal to a percentage of the target date fund comprisingthe growth asset at the (n)th interval, wherein (n) is initially equalto (N), wherein (N) is the number of intervals until the end date,wherein (N) is greater or equal to one; calculating, using theprocessor, a value R(n) that is equal to a percentage of the target datefund comprising the reserve asset at the (n)th interval; setting, usingthe processor, (n) equal to (n) minus one; and when (n) is greater thanor equal to zero, repeating, using the processor, said calculating G(n),said calculating R(n), and said setting.
 3. The method of claim 2,wherein the reserve asset comprises treasury bills (Tbills) and treasuryinflation protected securities (TIPS), wherein said calculating R(n)further comprises: calculating, using the processor, a value RTBills(n)that is equal to a percentage of R(n) that comprises TBills at the (n)thinterval; and calculating, using the processor, a value RTIPS(n) that isequal to a percentage of R(n) that comprises TIPS at the (n)th interval.4. The method of claim 2, wherein the growth asset comprises stocks andbonds, wherein said calculating G(n) further comprises: calculating,using the processor, a value Gstocks(n) that is equal to a percentage ofG(n) that comprises stocks at the (n)th interval; and calculating, usingthe processor, a value Gbonds(n) that is equal to a percentage of G(n)that comprises bonds at the (n)th interval.
 5. The method of claim 2,wherein said determining the glide path further comprises determining,using the processor, whether the (n)th interval is after the inflectiondate, wherein when the (n)th interval is after the inflection date, G(n)and R(n) are calculated using a liability-driven model, wherein when the(n) th interval is not after the inflection date, G(n) and R(n) arecalculated using a growth model.
 6. The method of claim 5, wherein saiddetermining the glide path further comprises, when the (n)th interval isafter the inflection date, setting, using the processor:${{R(n)} = {\left\lbrack {1 - \left( \frac{n}{i} \right)} \right\rbrack \cdot \left\lbrack \frac{1}{\left( {1 + d} \right)^{n}} \right\rbrack}};{and}$G(n) = 1 − R(n), wherein (i) is the inflection date, and d is anexpected annual return on the reserve asset.
 7. The method of claim 5,wherein said determining the glide path further comprises, when the(n)th interval is after the inflection date, setting, using theprocessor: ${{G(n)} = {\frac{G(i)}{i}(n)}};{and}$${{R(n)} = {{\left( \frac{{R(i)} - 100}{i} \right)(n)} + 100}},$wherein (i) is the inflection date.
 8. The method of claim 5, whereinsaid determining the glide path further comprises, when the (n)thinterval is not after the inflection date, setting, using the processor,G(n) equal to one hundred percent of the target date fund.
 9. The methodof claim 5, further comprising redistributing, using the processor, thetarget date fund according to the glide path.
 10. The method of claim 9,wherein said redistributing further comprises at each interval (n),reallocating, using the processor, the target date fund such that thegrowth asset equals G(n) and the reserve asset equals R(n).
 11. Themethod of claim 10, further comprising calculating, using the processor,the number of intervals until the end date.
 12. An article ofmanufacture comprising a computer readable medium comprising computerreadable program code disposed therein to generate a glide path for atarget date fund comprising a growth asset and a reserve asset, whereinthe glide path comprises a distribution of the growth asset and thereserve asset over a time period ending on an end date, the computerreadable program code comprising a series of computer readable programsteps to effect: identifying an acceptable risk level for the targetdate fund; determining, using the identified acceptable risk level, aninflection date; calculating a value G(i) that is equal to a percentageof the target date fund comprising the growth asset at the inflectiondate; calculating a value R(i) that is equal to a percentage of thetarget date fund comprising the reserve asset at the inflection date;and determining, using G(i) and R(i), the glide path for the target datefund, wherein at the end date the reserve asset comprises one hundredpercent of the target date fund.
 13. The article of manufacture of claim12, wherein said determining the glide path further comprises a seriesof computer readable program steps to effect: calculating a value G(n)that is equal to a percentage of the target date fund comprising thegrowth asset at the (n)th interval, wherein (n) is initially equal to(N), wherein (N) is the number of intervals until the end date, wherein(N) is greater or equal to one; calculating a value R(n) that is equalto a percentage of the target date fund comprising the reserve asset atthe (n)th interval; setting (n) equal to (n) minus one; and when (n) isgreater than or equal to zero, repeating said calculating G(n), saidcalculating R(n), and said setting.
 14. The article of manufacture ofclaim 13, wherein the reserve asset comprises treasury bills (Tbills)and treasury inflation protected securities (TIPS), wherein saidcalculating R(n) further comprises a series of computer readable programsteps to effect: calculating a value RTBills(n) that is equal to apercentage of R(n) that comprises TBills at the (n)th interval; andcalculating a value RTIPS(n) that is equal to a percentage of R(n) thatcomprises TIPS at the (n)th interval.
 15. The article of manufacture ofclaim 13, wherein the growth asset comprises stocks and bonds, whereinsaid calculating G(n) further comprises a series of computer readableprogram steps to effect: calculating a value Gstocks(n) that is equal toa percentage of G(n) that comprises stocks at the (n)th interval; andcalculating a value Gbonds(n) that is equal to a percentage of G(n) thatcomprises bonds at the (n)th interval.
 16. The article of manufacture ofclaim 13, wherein said determining the glide path further comprises aseries of computer readable program steps to effect, determining whetherthe (n)th interval is after the inflection date, wherein when the (n)thinterval is after the inflection date, G(n) and R(n) are calculatedusing a liability-driven model, wherein when the (n)th interval is notafter the inflection date, G(n) and R(n) are calculated using a growthmodel.
 17. The article of manufacture of claim 16, wherein saiddetermining the glide path further comprises a series of computerreadable program steps to effect, when the (n)th interval is after theinflection date, setting:${{R(n)} = {\left\lbrack {1 - \left( \frac{n}{i} \right)} \right\rbrack \cdot \left\lbrack \frac{1}{\left( {1 + d} \right)^{n}} \right\rbrack}};{and}$G(n) = 1 − R(n), wherein (i) is the inflection date, and d is anexpected annual return on the reserve asset.
 18. The article ofmanufacture of claim 16, wherein said determining the glide path furthercomprises a series of computer readable program steps to effect, whenthe (n)th interval is after the inflection date, setting:${{G(n)} = {\frac{G(i)}{i}(n)}};{and}$${{R(n)} = {{\left( \frac{{R(i)} - 100}{i} \right)(n)} + 100}},$wherein (i) is the inflection date.
 19. The article of manufacture ofclaim 16, wherein said determining the glide path further comprises aseries of computer readable program steps to effect, when the (n)thinterval is not after the inflection date, setting G(n) equal to onehundred percent of the target date fund.
 20. The article of manufactureof claim 16, wherein the computer readable program code furthercomprises a series of computer readable program steps to effectredistributing the target date fund according to the glide path.
 21. Thearticle of manufacture of claim 17, wherein said redistributing furthercomprises a series of computer readable program steps to effect, at eachinterval (n), reallocating the target date fund such that the growthasset equals G(n) and the reserve asset equals R(n).
 22. The article ofmanufacture of claim 21, wherein the computer readable program codefurther comprises a series of computer readable program steps to effectcalculating the number of intervals until the end date.
 23. A computerprogram product encoded in a non-transitory computer readable medium anduseable with a programmable computer processor to generate a glide pathfor a target date fund comprising a growth asset and a reserve asset,wherein the glide path comprises a distribution of the growth asset andthe reserve asset over a time period that ends on the end date, thecomputer program product comprising: computer readable program codewhich causes the programmable processor to identify an acceptable risklevel for the target date fund; computer readable program code whichcauses the programmable processor to determine, using the identifiedacceptable risk level, an inflection date; computer readable programcode which causes the programmable processor to calculate a value G(i)that is equal to a percentage of the target date fund comprising thegrowth asset at the inflection date; computer readable program codewhich causes the programmable processor to calculate a value R(i) thatis equal to a percentage of the target date fund comprising the reserveasset at the inflection date; and computer readable program code whichcauses the programmable processor to determine, using G(i) and R(i), theglide path for the target date fund, wherein at the end date the reserveasset comprises one hundred percent of the target date fund.
 24. Thecomputer program product of claim 23, wherein the computer readableprogram code which causes the programmable processor to determine theglide path further comprises: computer readable program code whichcauses the programmable processor to calculate a value G(n) that isequal to a percentage of the target date fund comprising the growthasset at the (n)th interval, wherein (n) is initially equal to (N),wherein (N) is the number of intervals until the end date, wherein (N)is greater or equal to one; computer readable program code which causesthe programmable processor to calculate a value R(n) that is equal to apercentage of the target date fund comprising the reserve asset at the(n)th interval; computer readable program code which causes theprogrammable processor to set (n) equal to (n) minus one; and computerreadable program code which, when (n) is greater than or equal to zero,causes the programmable processor to repeat said calculate G(n), saidcalculate R(n), and said set.
 25. The computer program product of claim24, wherein the reserve asset comprises treasury bills (Tbills) andtreasury inflation protected securities (TIPS), wherein the computerreadable program code which causes the programmable processor tocalculate R(n) further comprises: computer readable program code whichcauses the programmable processor to calculate a value RTBills(n) thatis equal to a percentage of R(n) that comprises TBills at the (n)thinterval; and computer readable program code which causes theprogrammable processor to calculate a value RTIPS(n) that is equal to apercentage of R(n) that comprises TIPS at the (n)th interval.
 26. Thecomputer program product of claim 24, wherein the growth asset comprisesstocks and bonds, wherein the computer readable program code whichcauses the programmable processor to calculate G(n) further comprises:computer readable program code which causes the programmable processorto calculate a value Gstocks(n) that is equal to a percentage of G(n)that comprises stocks at the (n)th interval; and computer readableprogram code which causes the programmable processor to calculate avalue Gbonds(n) that is equal to a percentage of G(n) that comprisesbonds at the (n)th interval.
 27. The computer program product of claim24, wherein the computer readable program code which causes theprogrammable processor to determining the glide path further comprisescomputer readable program code which causes the programmable processorto determine whether the (n) th interval is after the inflection date,wherein when the (n)th interval is after the inflection date, G(n) andR(n) are calculated using a liability-driven model, wherein when the(n)th interval is not after the inflection date, G(n) and R(n) arecalculated using a growth model.
 28. The computer program product ofclaim 27, wherein the computer readable program code which causes theprogrammable processor to determine the glide path further comprisescomputer readable program code which, when the (n)th interval is afterthe inflection date, causes the programmable processor to set:${{R(n)} = {\left\lbrack {1 - \left( \frac{n}{i} \right)} \right\rbrack \cdot \left\lbrack \frac{1}{\left( {1 + d} \right)^{n}} \right\rbrack}};{and}$G(n) = 1 − R(n), wherein (i) is the inflection date, and d is anexpected annual return on the reserve asset.
 29. The computer programproduct of claim 16, wherein said the computer readable program codewhich causes the programmable processor to determine the glide pathfurther comprises, computer readable program code which, when the (n)thinterval is after the inflection date, causes the programmable processorto set: ${{G(n)} = {\frac{G(i)}{i}(n)}};{and}$${{R(n)} = {{\left( \frac{{R(i)} - 100}{i} \right)(n)} + 100}},$wherein (i) is the inflection date.
 30. The computer program product ofclaim 27, wherein said computer readable program code which, when the(n)th interval is after the inflection date, causes the programmableprocessor to set: determine the glide path further comprises computerreadable program code which, when the (n)th interval is not after theinflection date, causes the programmable processor to set G(n) equal toone hundred percent of the target date fund.
 31. The computer programproduct of claim 27, wherein the computer readable program code furthercomprises a series of computer readable program steps to effectredistributing the target date fund according to the glide path.
 32. Thecomputer program product of claim 31, wherein the computer readableprogram code which causes the programmable processor to redistributefurther comprises computer readable program code which causes theprogrammable processor to, at each interval (n), reallocate the targetdate fund such that the growth asset equals G(n) and the reserve assetequals R(n).
 33. The computer program product of claim 32, furthercomprising computer readable program code which causes the programmableprocessor to calculate the number of intervals until the end date.